Everybody’s Selling Wine

It hit me earlier this week when I received an email from Alaska Airlines inviting me to earn frequently flier miles by buying wine. Here’s the offer

You could stand in front of a wall of confusing wine labels and search for a special selection or you can take advantage of Vinesse Wine Clubs’ exclusive new customer offer.

Try a hand-selected sampler of their favorite wines for only $6.99 per bottle; plus earn 2,750 Mileage Plan Miles with your first shipment, free shipping, and a welcome gift. Plus, earn an extra five miles per dollar spent (or six miles per dollar spent when you use your Alaska Airlines Visa) on all wines from American Cellars Wine Club.

… This limited time offer is a way of introducing you to American Cellars Wine Club. Every two months, American Cellars Wine Club brings wine lovers a new shipment of six captivating wines.

The $6.99 per bottle (and free shipping) price applies only to the introductory offer, of course. Prices are $12-$15 per bottle after that. You’ve probably seen wine club plans like this before.. The interesting thing (to me) isn’t the wine club itself, it’s the tie in with Alaska Airlines’ frequent flier club.

Investment Grade?

The Wall Street Journalwants to sell me wine, too. Perhaps they think I need more wine to help me forget what’s been happening to my retirement portfolio recently. Go to wsjwine.com to read the news. You might expect the WSJ wine group to be a bit upmarket, but their come-on introductory offer is about the same – a $69.99 (a savings of $120, it says here) mixed case of wine (plus some cool wine parephenalia). Future cases, if you join the club, are $139.99 plus tax and shipping (a saving of 20% over retail is guaranteed). Wine shops will sometimes give you a 15%-20% discount on a case purchase — just ask. Pre-selected mixed cases (this seems to be something wine clubs like to offer) range from about $80 to just under $200.

You can purchase individual wines, too, of course. A search for Pinot Noir found five wines ranging from a $19.50 2006 Mendocino single vineyard bottling to a 1996 Domaine Ponsot Clos de la Roche Grand Cru ‘Vielles Vignes’ for $250. The Cabernet Sauvignon offering includes 13 selections priced from $14.99 to $101.99 for a 1999 Heitz from the Trailside Vineyard.

Amazon AVA

The third announcement comes from Amazon.com, the internet book (and almost everything else) seller. Wine is coming to Amazon country, although not necessarily in a big way. The beauty of Amazon.com for books is that you can find everything there. Wine will be different. Early reports suggest that the Amazon store will stock about 300 wines that it will ship to customers in 26 states. That’s not a big presence, but it is a start.

Actually, Amazon made a start in web wine some years ago. Amazon invested $30 million in WineShopper.com in 1999, during the dot com boom. That venture didn’t really pan out. I understand that Wine.com sells gift baskets (but not wine) through Amazon.com now. Amazon is counting on its new wine shop to be different.

Amazon.com is not the first big box retailer to sell wine on the web. Costco.com has a pretty interesting wine selection, although they will ship to just four states: California, Washington, Oregon and New Mexico. Here’s a snapshot of what’s available to Washington State buyers:

Twenty two wines from Bordeaux. Chateau Mouton Rothschild 2005 ($599.99), a magnum of 1997 Chateau d’Yquem ($499.99) down to lesser names for about $10 per bottle. (It is interesting to note that big name Bordeaux wines are for sale to Washington buyers, but not to those in other states.)

Ten Champagnes and sparkling wine gift packs ($25 5o $139).

Thirty-three red wines in the $10 to $50 price range. Plus just a few white wines in the same general price area.

Costco is the largest single retailer of wine in the United States. It is interesting, therefore, that they have taken a conservative approach to internet wine sales. I wonder if Amazon.com can succeed where Costco (so far) hesitates to venture and where other sellers have found considerable challenges?

Leverage

What do these examples have in common. Well, they are selling “mail order” wine, dummy. Yes, I know. But it seems to me that they are really examples of leverage. Each of these businesses wants to leverage some proprietary asset to increase profits through wine sales. It’s a classic business strategy, but not one that works every time.

Alaska Airlines has a very successful frequent flier program, with lots of retail “partners” and mileage point purchase tie-in deals. It’s pretty natural that they would try to leverage their big investment in the frequent flier program in ways that would both generate revenues and promote the “brand.” Wine is seen as an upscale product that probably lends status to the airline brand, if anyone really thinks about these things the way marketing consultants say they do. Interestingly, however, a really upscale wine buyer probably wouldn’t jump to purchase a case of seven-buck wine that someone else selects. But probably some people will buy the package, to get both the discounted wine and the extra miles, and maybe that will be the start of good wine relationship (I don’t think wine clubs would exist if customers didn’t find them useful). If not, well there’s bound to be another introductory offer in the next email.

The Wall Street Journal is in good company in starting a wine club. Other periodicals that feature wine reviews often offer wine clubs, special promotions, or other tie-ins. The well regarded work of Dorothy Gaiter and John Brecher, the WSJ wine critics, gives the Journal and therefore the wine club instant credibility (even though Dorothy and John don’t have any connection with the club itself — the website says that the wine club is independent of the WSJ news department). Prestige by association, you might say, and a way to leverage borrowed reputation to some extent, but not in any unusual or deceptive way. It will be interested to see if the venture is successful and how many WSJ readers are attracted by the $69 introductory offer. Ultimately, it will be quality and service, not the WSJ name, that determine this venture’s fate.

Amazon.com has earned a sterling reputation as an online seller and perhaps they can leverage their reputation for selection and service in books and other products to sell wine. But I am a skeptic. My feeling is that wine is never going to be as easy to commodify as books. You can do this to a certain extent by using numerical wine ratings to sell the wine (Costco does this for its more expensive online wines, but everyone does this in stores using “shelf talkers”), but really numbers don’t capture the complexity of wine. How could they? (I wrote about this in Wine by the Numbers.)

So how can Amazon succeed? Well, they might not. But I think the key is going to be whether customers really buy into the project and leave detailed feedback on the wines. Anyone who has shopped Amazon for books knows that customer reviews can be very useful. If thoughtful wine drinkers use the Amazon marketplace to as a forum to exhange information, opinions and observations, they could make it into a virtual wine group that could at once demystify wine a bit and decommodify the internet wine buying experience. That would be a successful implementation Wine Web 2.0. And, interestingly, it would mean that Amazon was able to leverage their most valuable assets, which are their active customer base and interactive feedback model. Let’s see what happens when Amazon wine goes live.

2 responses

Indeed everyone seems to be jumping on the bandwagon to sell wine. One of the biggest barriers to entry however seems to be the archaic statutes and regulatory requirements on the books of most every state. One would think that the fairly recent US Supreme Court rulings would have resolved this, which it did to an extent, but mostly for the benefit of wineries – not retailers.

Costco’s strategy might be to slow down the spending on legal fees to defend their right to ship. From what I can see, they have been big proponents of trying to keep the Prohibition fringe from reemerging in this country and have devoted substantial resources to the fight.
We are not going to make progress in commerce until we can change laws at a state level, not the least of which is the traditional three tier system of distribution: winery, distributor and retailer. Distributors have a lot of muscle in terms of political capital (read: contributions to politicians); thus the influence to protect their turf, even to the detriment of consumers.

Of course more retailers mean more competition for my dollar, which translates into more choices and better prices for me. The caveat is however, if I can get it shipped to my state or not. The downside of having more retailers is that there is more potential for duplicity and shabby business practices, especially when it comes to the issue of a wine’s provenance.

I have come to trust certain retailers and auction houses over the years. These companies stand behind their wines as much as reasonably can be expected. One company even spent several days with me to track down the origin of a wine I purchased but suspected was counterfeit; it was not. So Amazon may get in the game but I doubt seriously if they care about wine like a fine wine merchant does. I would much rather pay a few dollars more to keep smaller wine merchants in business and know that my purchases are the quality I expect and am paying for.

As with most purchases, and perhaps more-so with internet purchases: buyer beware!

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What would you get if you crossed the Wine Spectator, America's best-selling wine magazine, with the Economist, the world's leading business weekly? The answer is this blog, The Wine Economist, which analyzes and interprets today's global wine markets. The Wine Economist was named 2015 "Best in the World" wine blog by Gourmand International. Staff: Mike Veseth (editor-in-chief) & Sue Veseth (contributing editor).